A Rio Tinto logo is displayed on the front of a wall panel during a news conference in Sydney November 29, 2012. REUTERS/Tim Wimborne

The campaign, backed by the Australian government, two Canadian provinces and Western Australia-based uranium producer Paladin Energy Ltd (PDN.AX), could unlock some of the world’s highest-grade ore for development just as demand for the radioactive element looks to surge.

Unlike Australia, which has no restrictions on uranium-mine ownership, Canada restricts foreign companies from owning more than 49 percent of any uranium mine. There are no ownership restrictions on foreign participation in exploration.

“It’s such an absurd situation,” John Borshoff, managing director of Paladin, said in an interview. It’s “something that is an anachronism from the Cold War”.

Borshoff said the Australian government, Rio Tinto and Paladin are joining forces to lobby Ottawa, while the Canadian provinces of Saskatchewan and Newfoundland and Labrador are also pressing for change.

The push to open Canada’s uranium sector comes while spirited debate about foreign investment elsewhere in the economy is underway. Ottawa last year approved a takeover of oil company Nexen Inc by China’s CNOOC Ltd (0883.HK) but declared the Canadian oil sands off limits to state-owned enterprises in the future.

In 2010, as public concern grew about foreign control of resources, Ottawa blocked a hostile bid for fertilizer producer Potash Corp of Saskatchewan POT.TO by Anglo-Australian miner BHP Billiton PLC BLT.L.

LOTS OF URANIUM

Ranking behind only Kazakhstan, Canada is the world’s second-biggest producer of uranium, which is mostly used to power nuclear reactors. Canadian uranium, produced in Saskatchewan by Cameco Corp (CCO.TO) and France-based Areva, accounts for 17 percent of global output.

The ownership issue has come to the fore as Rio Tinto, Areva and Paladin all seek to develop promising Canadian deposits.

Ottawa can grant an exception to the ownership policy if a foreign company demonstrates it cannot find a Canadian partner. But it last did so in early 1990s, for two Areva projects.

Areva owns the Kiggavik project in the northern territory of Nunavut, while Paladin is developing Michelin in the eastern province of Newfoundland and Labrador.

To be sure, there is no certainty that the miners would start production in the near term even if they could, given escalating capital costs and stubbornly low uranium prices.

NEW REACTORS TO DRIVE UP DEMAND

By the time the deposits could be producing in seven to eight years, demand may be rising again, reversing weakness triggered after the 2011 Japanese tsunami caused a meltdown at the Fukushima-Daiichi power plant and led to a shutdown of dozens of reactors.

Some 65 reactors are under construction around the world as countries such as China seek to produce energy for a growing population.

Senior mining analyst Raymond Goldie of Salman Partners in Toronto said BHP would likely be one of a handful of interested investors if Canada changed its policy on uranium mining.

It would be “open season, but not many people carrying guns,” he said.

BHP, the world’s No. 6 uranium producer in 2011, declined to comment.

Borshoff said the current policy makes it difficult for Paladin to find a partner to share the Michelin project’s costs because of the lack of clarity on who would operate it.

Rio Tinto spokesman Illtud Harri said the company is “actively engaged” with Canada and Saskatchewan on uranium mine ownership. Areva declined to comment, but Saskatchewan government sources said the company is also pressing Ottawa.

Australian Resources and Energy Minister Martin Ferguson raised concerns about uranium ownership with Canada last year. Ferguson’s office refused to comment on the issue, but said Australia was not considering any form of trade retaliation.

OTTAWA PLANNING NO CHANGE

Canada isn’t alone in restricting mine ownership.

Kazakhstan’s state-owned company Kazatomprom has authority to hold a stake of any size in uranium mines.

But that hasn’t stopped foreign companies from controlling mines there. Cameco holds 60 percent of the Inkai mine in Kazakhstan in a joint venture with Kazatomprom, while Areva has 51 percent of the Katco mine.

Australia has no such curbs, and Cameco has snapped up two Australian deposits in recent years.

Ottawa has restricted foreign ownership of uranium mines since 1970, driven by concerns about weapons proliferation, and efforts to change the rules have waxed and waned over the years.

A 2008 report recommended Canada liberalize the policy for countries that are open to Canadian investment.

“It was more than thought about - they were heading down this direction,” said Saskatchewan Premier Brad Wall.

But foreign control of Canadian resources became a hot political potato in 2010, and Ottawa blocked BHP’s bid for Potash. A review of uranium policy was halted, leaving Wall puzzled. Natural Resources Minister Joe Oliver said on March 4 that the government has no plans to change its policy.

Wall said Ottawa’s curbs on state-owned investment in oil sands companies could provide a model for changes to the Non-Resident Ownership policy (NROP) in the uranium sector.

“We said perhaps this (approach) is a good replacement for NROP, because obviously uranium is very much a strategic resource as well for our country,” said Wall, who opposed the BHP bid for Potash Corp because he feared it would cut potash prices and government royalties.

Unlike Potash Corp, Cameco is protected from takeover by Canadian law.

Areva, in which the French government owns a controlling stake, could be grandfathered in but other state enterprises would be blocked, he said.

But the pleas may fall on deaf ears in Ottawa, where the opposition New Democratic Party (NDP) also wants to keep a lid on foreign uranium investment.

“I think Canada is more than fair despite the fact that we have some restrictions in some key strategic sectors, and if you asked the Canadian public, I think they would be inclined to say we have to be very careful,” said Peter Julian, the NDP’s energy and natural resources critic.

Saskatchewan argues that it matters little who owns its uranium mines as long as they are not state-owned enterprises.

Opening the door to foreign miners only makes sense, considering that Canada has negotiated new market access to energy-hungry China and India, Wall said.